A home equity line of credit (HELOC) is a revolving credit line secured by your home. You keep your existing first mortgage, borrow only what you need during a draw period, and repay later. Most lenders let New Jersey homeowners borrow up to a combined 80% to 85% of the home's value across the first mortgage and the HELOC, and most HELOC rates are variable. Limits and terms vary by lender.
How a HELOC works
- Draw period: you can borrow, repay and borrow again up to your credit limit, often for about 10 years. Many lenders allow interest-only payments during this period.
- Repayment period: the line closes to new borrowing and you repay principal and interest over a set term.
- A second lien: the HELOC sits behind your first mortgage, so your original loan and its rate stay in place.
How much can you borrow?
Lenders look at combined loan-to-value (CLTV), which is your first mortgage plus the HELOC limit divided by the home's value. Illustration (hypothetical, not a quote): a home worth $500,000 with a $250,000 first mortgage. At an 80% CLTV the combined limit is $400,000, so a HELOC of up to about $150,000 could be possible, depending on credit, income and the lender.
HELOC rates and payments
- Variable rate: most HELOCs have a rate that moves with a benchmark such as the prime rate, so your payment can rise or fall.
- Fixed-rate options: some lenders let you lock part of the balance at a fixed rate.
- Payment shock: when the draw period ends, the payment can jump because principal repayment begins.
What to compare between HELOC lenders
- The maximum CLTV and credit limit
- The rate type, the margin over the benchmark, and any rate caps
- Closing costs, annual fees and early-closure fees
- The draw period and repayment term
- Minimum draw requirements and any fees for unused lines
HELOC or cash-out refinance?
If your current mortgage rate is low and you want to keep it, a HELOC leaves the first mortgage alone. If you want one fixed payment on a single loan, or today's rates are close to yours, a cash-out refinance may fit better. See our side-by-side guide to cash-out refinance vs. HELOC in NJ and the guide to a cash-out refinance in NJ.
Frequently asked questions
Is HELOC interest tax deductible?
It may be, in some cases, depending on how you use the money. Interest is generally deductible only when the funds are used to buy, build or substantially improve the home. Ask a tax professional about your situation.
What credit score do I need?
It varies by lender. Many look for scores in the mid-600s or higher, and better credit usually means a lower rate and a higher limit.
What are the risks?
Your home secures the line, so missed payments can put the home at risk. A variable rate can raise your payment, and a falling home value can reduce or freeze your available credit.
How can JahnLends help?
We compare home equity options across our lender network and show you how they stack up against a cash-out refinance. Availability varies by lender and property. See our HELOC page or call (732) 754-7474.
Compare HELOC options with a loan officer →
Rates, terms and limits vary by lender and change without notice. A home equity line is secured by your home. JahnLends is the Woodbridge, NJ branch of AMS Mortgage Services, NMLS# 145742. Equal Housing Opportunity. For information purposes only. This is not a commitment to lend or extend credit. All loans are subject to credit approval. Other restrictions may apply.